Servos and local grocers now battlefronts in the grocery war of convenience

THE race is well and truly on between Woolworths and Coles to downsize to convenience-store footprints, with petrol service stations and local grocer real estate being seized for the transformation.

As Australian retail confronts a new age of unprecedented competition – think ALDI, Costco, Kaufland, Amazon, et al. – the two big grocers are bolting early in the battle to claim good ground, digging in in the modern convenience space.

Coles yesterday opened its first Coles Local, in inner-city Melbourne, half the size of a regular supermarket, following Woolworths’s sale on Friday of 540 service stations to the British company EG Group for $1.72 billion.

The welcome capital is expected to mostly be returned to Woolies shareholders in dividend, but the sale also marks a retreat to core interests, out of fuel back into groceries.

Stick to your knitting

Retail expert Associate Professor Gary Mortimer from the QUT Business School says one of the major challenges for the two majors has been having to buy into industries in which they have little interest.

For example, in Queensland you have to own a pub to sell liquor from a bottle shop.

Putting aside arguments about the lure of owning poker machines in those pubs, managing pubs or fuel at service station is not at the retailers’ core.

With regard to service stations, Professor Mortimer says they have little interest in managing fuel but great interest in increasing their convenience footprint.

“Woolworths will pick up welcome capital from the sale of its fuel assets but will retain the retail element of the offer,” Professor Mortimer says.

“What we’ll see is these service stations becoming mini convenience stores.”

The service station model feeds conveniently into the convenience thrust and demand for good quality food for take away, or eating out.

The move to this convenience is fertile ground for tech and the arrival of 5G. Caltex, aligned with Woolworths, already has it Foodary app allowing a single transaction click-and-collect interface for a set dollar amount of fuel and food from its healthy eating offering.

Coles Local

Launching the first Coles Local at Melbourne’s Surrey Hills, Coles chief executive Steven Cain said: “Ten years ago people were buying groceries once or twice a week, they’re now buying fresh food three to four times a week and are very focused on what’s for dinner tonight.”

According to market research company IRI, the convenience store channel is growing faster than traditional supermarkets, fuelled by time-poor customers doing top-up or impulse shops several times a week.

“The big once-a-week shops our mothers used to do are not necessarily happening as much – the time-poor shopper is getting bits and pieces here and there,” IRI’s e-commerce development manager Ruth Butler told the Australian Financial Review.